Vermont Bid Bonds

Surety Bond Professionals is a family owned and operated bonding agency with over 75 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your performance bond needs.

What Are Vermont Bid Bonds?

Vermont bid bonds are intended to protect construction project owners against the financial losses they can incur when a contractor chosen as the winning bidder does not enter into a contract. In purchasing a bid bond, a contractor (the bond’s “principal”) pledges to provide any necessary performance and payment bonds and sign a contract with the project owner (the “obligee”) if offered the job. The bond provides a way to compensate the obligee for the resulting monetary damages if the principal does not accept the job. It also deters contractors from submitting frivolous bids.

Who Needs Them?

There is no statutory requirement for bid bonds when contractors vie for state-funded construction jobs in Vermont. However, some municipalities do require them from contractors bidding on local public works projects. And private project owners will only accept bids from contractors furnishing a bid bond, particularly for larger construction jobs. When a bid bond is required, the amount typically must be in the range of five to ten percent of the contractor’s bid price.

How Do Vermont Bid Bonds Work?

There are three parties to every Vermont bid bond. The obligee, the principal, and the bond’s guarantor, known as the “surety.”

The principal is legally obligated to pay any valid claim for monetary damages submitted by the obligee. However, as the guarantor, the surety will ensure a swift resolution by paying the claim on the principal’s behalf. This is an extension of credit to the principal and must be repaid according to the terms established by the surety. Not repaying the surety is likely to result in the principal being sued to recover the debt.

How Much Do They Cost?

In the state of Vermont, bid bonds play a crucial role in ensuring the integrity of construction projects. The obligee, often the project owner, determines the necessary bond amount, typically ranging from 5% to 10% of the total bid. At Surety Bond Professionals, we take pride in offering bid bonds to Vermont contractors without additional charges. We can do this because, upon securing the contract, contractors are encouraged to acquire Performance and Payment (P&P) bonds through us.

When it comes to underwriting bid bonds, the approach is nuanced. For smaller contracts and emerging enterprises, emphasis is placed on the contractor’s personal credit history. As the scale of projects grows, underwriters conduct a more comprehensive assessment. This includes evaluating the project’s specific location, an analysis of the contractor’s stability, and a thorough examination of their creditworthiness.

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